Low inventory pinches Tallahassee housing market

New homes are being built in the Evening Rose neighborhood by Verve Construction company on Saturday, March 25, 2017. Despite demand to buy homes and new construction, Tallahassee's housing inventory remains low for the market.(Photo: Joe Rondone/Democrat)Buy Photo

Tallahassee's low inventory of single-family homes is creating demand in coveted neighborhoods and bidding wars among house hunters fighting the clock before interest rates rise.

Rates are inching up but they remain at historic lows. High demand and low inventory are a national trend. By 2014, the rest of the country was screaming for inventory because they were out of homes, said Tallahassee Realtor Joe Manausa.

“Not us. We had so many extra homes from the bubble," said the veteran real estate agent and blogger who does deep dives into housing data. "We didn’t really start to feel it until early last year. And now we’re in a market that the rest of the U.S. has been in for years."

Leon County only has a five-month housing supply — meaning inventory would dry up if every house on the market sold within five months. February 2016 saw a 5.2-month supply for detached single family homes. During the last 12 months, the supply has swung between three and five months.

The ideal supply hovers at six months or more but Tallahassee's is steadily declining.

There's been a steady dip in homes available in the Tallahassee area housing market.(Photo: Tallahassee Realtors Assocation)

Steven Louchheim, Tallahassee Board of Realtors CEO, cautioned statistics can vary, but his members are seeing them borne out.

"When I talk to my members, they said they are just as busy as can be,” Louchheim said, adding the spring and summer are active selling months. "At this point, absent a big spike in interest rates, that should continue for the next four or five months."

In Tallahassee, 192 homes were sold in February. The largest number - 40 homes - sold for between $150,000 to $199,999, and represented 21 percent of the market. The other three top sales price categories were: $100,000 to $149,999 with 26 homes sold; $200,000 to $249,999 with 28 homes sold and; $300,000 to $399,999 with 26 homes sold.

Interest rates are driving the market, local real estate experts say. The low rates have been a boon for Tallahassee — home to state employees who haven't had across-the-board raises in nearly a decade — allowing buyers to get more house for their money.

Manausa compared the housing market to a game of musical chairs.

"We’re not a $400,000 house town," Manausa said. "What happens when the music stops? In the housing market, the music would be interest rates. As, long as they remain low, then people can buy $400,000 homes.

“But when interest rates go up, even when they just tweak up a little bit, the top end of the market gets chopped. No one in the middle gets hurt. I might be buying a house next time, but it just may be a smaller house next time.”

The homes in highest demand are new or newer construction homes. However, most subdivisions aren't building more than 50 homes at a time.

The next major influx of new homes is expected to come with the construction of the first phase of Welaunee, a master planned community dubbed the SouthWood of Tallahassee's Northeast.

The Canopy Development within Welaunee, east of Fleischmann Road between Centerville and Miccosukee roads, is expected to bring 900 homes, but it is not expected to be complete for seven or eight years. House seekers are hunting now.

Alex Sanchez, president and CEO of the Florida Bankers Association, said interest rates will continue to pick up if the economy remains strong.

“Now, will they go from 4 percent to 8 percent in a month? No. In a year? No. But they will go up,” Sanchez said. “The economy is doing well and the Federal Reserve Bank wants to control inflation so they will tinker with usually a quarter point.”

Christic Henry, a Realtor and owner of Kingdom First Realty, said foreclosures can be a good option for hungry buyers in a lean market if the homes aren't neglected and riddled with needs.

"Everybody wants to buy a foreclosure, but it comes with work,” she said.

Henry, however, doesn't think the housing shortage is as dramatic as some paint. She said some segments of Tallahassee could be considered a "sleep markets" where many are flocking to the northeast and haven't "awoken" to homes are available in other parts of town.

"But for people who are urban pioneers who aren’t caught up in schools and they want to be somewhere that’s nice and affordable, you will find a lot of that in southeast and southwest Tallahassee," she said. "You can get a good investment in these markets, you have to know what your position is for your investment and know what you can afford."

Contact TaMaryn Waters at tlwaters@tallahassee.com or follow @TaMarynWaters on Twitter.

House hunters, recent home buyers and Realtors chime in on Tallahassee's market:

Latoya Smithwick, a house hunter, who's looking for a home in the Tallahassee market.(Photo: Courtesy of Latoya Smithwick.)

Latoya Smithwick — house hunting

Smithwick wants a home with three bedrooms and two bathrooms, but she hasn't found the right one in her price range. But she's serious about being a homeowner.

So much so that she and her 4-year-old daughter ditched their 1,300-square-foot apartment and moved in with Smithwick's mother. She's hoping something will turn up soon.

"I'm being optimistic," she said. "You do get discouraged at times. I'm stepping out on faith ... I really want this process to work. But with prayer and a Realtor, I hope it works."

Gilbert Allen and his wife, Jennifer, outside of their new home.(Photo: Gilbert Allen.)

Gilbert Allen— Recent homeowner

Gilbert Allen and his wife, Jennifer, were locked in bitter bidding wars before they finally received keys to their own home. They'd been looking for more than a year. They wanted a home suitable for a growing family, one with a yard and good schools.

Time was always critical when house hunting, he said. He'd use his lunch breaks to view home after home after home. The competition was stiff. Gilbert recalls a string of cars parked outside a home, all filled with eager house hunters.

"As we were coming out, there was a family coming in to see it. We knew if we loved the home, all of the families that we were passing coming in also loved the home. So we didn’t have a lot of time to make a decision,” Allen said. "That was the stressful part about it.”

They finally won a bidding battle and closed on their northeast home in September 2016.

"Once they accepted our offer, it was a great relief to know we didn’t have to deal with any more competition," Allen said. "It was very smooth after that and we were just looking at the finish line."

Kristie Shaw and her boyfriend closed on a their Buck Lake home on March. 8.(Photo: Courtesy of Kristie Shaw.)

Kirstie Shaw — First-time homeowner

Shaw bought her home with the future in mind. Three main reasons prompted her house hunt: Interest rates were creeping up, she turns 30 this year and now was the right time to buy.

Her house hunt began in early February. Shaw looked for homes in the northeast and new construction homes, which were too costly per square footage because of high demand for homes. She found a 2,100-square-foot with three bedrooms, two bathrooms, an office and open concept in Buck Lake.

She said she and her longtime boyfriend believe the house and the area is the right fit for them now and once they have a family.

"The Tallahassee market is so limited and it’s only going to get more limited. It’s going to become more and more difficult to buy a home. The days of the 4 percent interest rates are out the window," Shaw said, adding rates are likely to increase. "That’s not something I wanted to wait on.”

Joe Manausa — Realtor and owner of Joe Manausa Real Estate

His advice: Look at long-term trends and try to realize how important the land underneath the house is worth. "If you can buy an old outdated home on an A++++ piece of dirt, maybe it will take you five years to renovate it. That’s OK. But if you buy a new house today, five years from now it’s just as out of date as the home you would have bought … I’m not saying don’t buy new construction. What I’m saying is look at the dirt."

Bonnie Fowler — Realtor at Armor Realty of Tallahassee Inc.

Her advice: House hunters should select a Realtor and get prequalified with a local lender before they set eyes on Realtor.com, Zillow or Trulia. Cash buyers need to be prepared to provide a "proof of funds sufficient to purchase" letter or statement. "Homes in the $300,000 and under price range are selling quickly if they are properly prepared and priced correctly. And, we are seeing a lot of multiple offers."

Brian Sealey, broker and president of the Sealey Team(Photo: Brian Sealey, broker and president of the Sealey Team)

Brian Sealey — Broker and President at the Sealey Team: A Real Estate Company

His advice: Have all of your financial questions prepared before you start looking. A pre-qualification letter should be acquired before seeing a potential home.

"If you're walking into these homes and you're in a bidding situation, the seller isn't willing to wait 15 days for you to decide ... If you're not pre-qualified, they're not going to be willing to take the risk. In a bidding situation, you're going to lose."